Legislature(2015 - 2016)HOUSE FINANCE 519
10/29/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB3001 | |
| Enalytica Presentation: Initial Analysis of the Transcanada Buyout Proposal | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB3001 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
THIRD SPECIAL SESSION
October 29, 2015
1:36 p.m.
1:36:51 PM
CALL TO ORDER
Co-Chair Neuman called the House Finance Committee meeting
to order at 1:36 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Janak Mayer, Chairman and Chief Technologist, enalytica;
Nikos Tsafos, President and Chief Analyst, enalytica;
Representative Paul Seaton; Representative Lora Reinbold;
Representative Liz Vazquez; Representative Andy Josephson;
Representative Benjamin Nageak; Representative Shelley
Hughes; Representative Geran Tarr; Representative Matt
Claman.
SUMMARY
HB 3001 APPROP: LNG PROJECT & FUND/AGDC/SUPP.
HB 3001 was HEARD and HELD in committee for
further consideration.
ENALYTICA PRESENTATION: INITIAL ANALYSIS OF THE TRANSCANADA
BUYOUT PROPOSAL
Co-Chair Neuman reviewed the agenda for the day.
HOUSE BILL NO. 3001
An Act making supplemental appropriations; making
appropriations to capitalize funds; making
appropriations to the general fund from the budget
reserve fund (art. IX, sec. 17, Constitution of the
State of Alaska) in accordance with sec. 12(c), ch. 1,
SSSLA 2015; and providing for an effective date.
1:38:02 PM
^ENALYTICA PRESENTATION: INITIAL ANALYSIS OF THE
TRANSCANADA BUYOUT PROPOSAL
1:38:05 PM
JANAK MAYER, CHAIRMAN AND CHIEF TECHNOLOGIST, ENALYTICA,
introduced himself and relayed that it was his fourth year
advising the legislature on oil and gas economics and
fiscal issues. Additionally, he had advised on questions
related to natural gas commercialization and the project to
commercialize North Slope reserves.
NIKOS TSAFOS, PRESIDENT AND CHIEF ANALYST, ENALYTICA,
introduced himself. His background was in natural gas
commercialization strategy and project development; it was
his third year advising the legislature on topics related
to North Slope natural gas.
Mr. Mayer introduced the PowerPoint Presentation:
"TransCanada's Participation in AK LNG: Key Issues" dated
October 29 [2015] (copy on file). He reported that he and
Mr. Tsafos had been present for all House and Senate
committee meetings during the current special session. He
relayed that at the beginning of the special session they
had circulated an extensive report providing enalytica's
take on the key issues. He expressed intent to summarize
their view of things in their role of providing due
diligence.
1:40:07 PM
Mr. Mayer slide 2: "Back To 2014: View From 2014: Why
TransCanada?" He noted that in 2014, session had largely
been devoted to debate on SB 138 [legislation passed in
2014 related to a gas pipeline, AGDC, and oil and gas
production tax], including the Heads of Agreement (HOA) and
the Memorandum of Understanding (MOU). He addressed that
TransCanada's participation in the project was perhaps the
most contentious aspect of the proposal throughout that
time. He discussed that there had been an impassioned and
at times compelling argument by the former administration
[Parnell Administration] in support of TransCanada's
participation. Additionally, there had been a degree of
scrutiny and skepticism from the legislature about the
idea. He intended to think about the situation and
skepticism from the past to frame the current status and
arguments put to the committee.
Mr. Mayer noted that in 2014 the Parnell Administration had
argued for TransCanada's involvement in the project based
on various strong points. he cited TransCanada's experience
as a large, highly capable and experienced pipeline
company, particularly on northern pipelines and Alaskan
natural gas pipeline projects (especially through the
Alaska Gasline Inducement Act (AGIA) process).
Additionally, there had been a significant emphasis on
questions of continuity and momentum. He elaborated that
TransCanada had conducted work during the AGIA process and
it had a significant amount of intellectual property data
as a result. During the transition period, TransCanada and
the other parties worked well together and there was a
desire to ensure the transition of the work product over to
the new AKLNG team in a seamless way and to dissolve the
AGIA partnership cooperatively.
Mr. Mayer addressed governance on slide 2. He relayed that
the Parnell Administration had put forward a strong
argument that it had appreciated the participation of a
company that made money by moving gas rather than
commercializing particular reserves. The thought had been
that TransCanada would help the state negotiate terms to
make the pipeline infrastructure as expandable as possible
and that the state's interest was not necessarily just
monetizing the existing resources at Prudhoe Bay and Point
Thomson. The former administration had also believed that
TransCanada would be a commercially minded partner when
there was potential new gas to bring into the project in a
post construction and operation. Additionally, it had
argued that TransCanada's experience would potentially make
a successful project more likely. Finally, the former
administration had argued that TransCanada would relieve
the state from cash calls during the development phase,
which was the assertion enalytica had been the most
skeptical of. The idea had been that TransCanada's
involvement would help with the state's overall debt
capacity. He believed there had been significant
recognition that compared to potential cost of capital to
the state through debt that the agreement with TransCanada
could be expensive.
Mr. Mayer believed the legislature rightly had skepticism
about particular points raised by the former administration
in 2014. There had been a question about whether
TransCanada tariff costs would be competitive to market
norms and how it would compare to the state's cost of debt.
In response to the concern the legislature had included a
provision in SB 138 that an extensive report would be
conducted on the various financing options for the state.
He believed in terms of risk and reward there had been
concern that the arrangement with TransCanada may be
slightly one-sided. In particular that TransCanada had
earned an equity rate of return on its participation in the
project, but almost all of the equity risk remained with
the state. For example, if there had been an increase in
the capital requirement of the project it would pass on to
the state through the TransCanada tariff. Additionally, if
TransCanada was not able to arrange financing for the
project, it could walk away at any point and be reimbursed
with interest. TransCanada's risk profile looked more like
the risk profile of debt rather than the risk profile of
equity. He furthered that by fronting the capital to the
state, TransCanada also received the voting rights within
the project partnership. There would be certain crucial
items over which the state would have the right of veto
including things like approval of the work plan and budget.
Ultimately TransCanada would be free to make its own vote
in its own interests which may align with the state and may
not.
Mr. Mayer addressed the final point on slide 2 related to
back-in rights. He discussed that the MOU and original deal
contained numerous off-ramps. He noted that many
legislators had observed that some of the off-ramps
appeared to lead straight back to an on-ramp. He elaborated
that the state could terminate [the agreement with
TransCanada] for numerous reasons at various times, but the
MOU included a clause specifying that if the state
proceeded with the project or a substantially similar
project within 5 years of termination, the state had to
offer TransCanada the right to participate. Due to the
areas of concern, the state wanted to ensure there was at
least one solid off-ramp. He explained that TransCanada had
clarified that the back-in-right would be put into an
eventual Firm Transportation Services Agreement (FTSA), but
not into the Precedent Agreement (PA) that would govern the
relationship with TransCanada until the end of 2015. He
furthered that the end of 2015 was the key point in the
contractual relationship with TransCanada where there was
one clean off-ramp; it was the one time the state could opt
to sever the relationship without incurring an ongoing
commitment.
1:50:31 PM
Mr. Tsafos turned to slide 3. He relayed that the
consultants planned to walk the committee through their
process in approaching the question [related to the
partnership with TransCanada]. The consultants had worked
to develop a report on their assessment of Governor
Walker's proposal and saw their role as conducting due
diligence on behalf of the legislature. He relayed that
they had worked with Black and Veatch [financial consultant
to the state] to understand its model and assumptions. He
relayed that enalytica was very comfortable with the Black
and Veatch numbers. He noted that enalytica did not try to
replicate the numbers given time constraints. He relayed
that enalytica had a number of conversations and an in
person meeting with the Black and Veatch team to discuss
its numbers.
Mr. Tsafos relayed that enalytica had the opportunity to
have some good discussions with the state's financial
advisors Greengate LLC and FirstSouthwest to understand
their perspective on the financial options available to the
state including understanding some of the assumptions
around the state's cost of debt going forward.
Additionally, enalytica had spoken with the Department of
Natural Resources (DNR) to understand its perspective. He
noted that he and Mr. Mayer had been present for all of the
legislative hearings on the topic. He relayed that they
felt comfortable with the majority of the case put forward
by the administration including the numbers and many of the
statements that had been made. Slide 3 included a list of
statements from various members of the administration and
its consultants that enalytica largely agreed with; it also
included a couple of statements that enalytica differed on.
Mr. Tsafos read slide 3: "Summary: Where We Agree with
Administration and Where Not:"
Where we agree with administration statements
· The State of Alaska (SOA) will pay TransCanada (TC)
no matter what
· SOA retains risk, but TC retains most decision
making (TC's only risk is deterioration of SOA
credit)
· SOA credit rating will be hit regardless of whether
TC is in the project or not
· SOA has several financing options-no need to panic
about having higher cash calls
Mr. Tsafos elaborated that while TransCanada would retain
much of the decision making, there were some exceptions in
terms of voting on the work plan and budget. He stated that
the termination of the agreement with TransCanada would not
mean the state would have to come up with $15 billion any
time soon.
Co-Chair Neuman asked for detail on options.
Mr. Tsafos replied that there were a number of things the
state could do, which he divided into three or four
buckets. First, the state would take back its 25 percent
share of the project if the deal with TransCanada was
terminated. One way partners around the world financed
their projects was to possibly sell some of that share down
the road to raise immediate funds. He detailed that
companies paid hundreds of millions to billions of dollars
to get into a project once it was underway in the
development phase. Second, the state could obtain financing
from the official sector (i.e. state financial institutions
and export/import banks), which had a long established role
to play in developing LNG projects and were usually able to
provide substantial sums of money at or below market rates.
A third option was project finance, the idea that the state
would raise debt at the level of the project and the debt
would be guaranteed by the revenues of the project. He
detailed that under the option the interest the state would
pay would be determined by the risk of the project rather
than the sovereign. For example, there were places in Papua
New Guinea where a lender may be more comfortable lending
to Papua New Guinea LNG than lending to Papua New Guinea;
therefore, a structure could be created to insulate the
project from some of the sovereign level risk, which would
enable the receipt of more attractive financing. Fourth,
there were all of the options available to a sovereign in
general (i.e. general obligation bonds, other bonds, and
equity options). For example, the state had an enormous
asset base that could be deployed in a number of ways in
support of the project. He remarked that even though the
state would go from $7 billion to $15 billion, it was a
very early development phase and the state had numerous
options. Lastly, he relayed that it was pretty unusual at
the development phase to have a very detailed financial
blueprint. He expounded that projects typically took care
of financing during the FEED stage and may sign at FID
[final investment decision] or sometimes slightly after
provided the financing had been agreed upon. He reiterated
that the absence of a detailed financial blueprint did not
concern them at the time because it was generally premature
at the current stage of development.
1:59:26 PM
Mr. Tsafos continued to address the points on slide 3:
· This is the only clean off-ramp that SOA has; failure
to pass this bill means harder to sever ties with TC
Mr. Tsafos elaborated that if the state entered into an
FTSA with TransCanada it would provide TransCanada with
back-in rights in the event of a substantially similar
project in the event of a termination. The current off-ramp
was the only time the state could sever the relationship
cleanly. He continued with slide 3:
· Not having Alaska Gasline Inducement Act (AGIA) makes
a big difference in SOA calculations
· Non-alignment in voting and non-visibility of
information undermine original case for TC in AK LNG
Mr. Tsafos expounded that the decision making the previous
year had been in some ways done under the "cloud of AGIA"
and the leverage of the two parties had been different
because of AGIA. He discussed the final point above;
enalytica believed that if they were true it would
seriously undermine the original case for including
TransCanada in the AKLNG project.
Mr. Tsafos remarked that it was not clear the state had a
large set of compelling options and alternatives. He
referred to testimony the previous day by Vincent Lee
[director of major projects development, TransCanada] that
TransCanada would likely vote no at the December 4 meeting
if the legislation was not passed. He relayed that the
presentation would focus on the financial case that had
been made by the administration. He stated that he and Mr.
Mayer largely agreed with the numbers, but they wanted to
provide further detail on the assumptions behind the data.
Secondly, enalytica believed the decision should focus on
strategic, not financial considerations. He relayed that
they would discuss why it was not obvious at present that
the absence of TransCanada would make a huge difference
financially. He and Mr. Mayer intended to address the
implications of terminating the agreement with TransCanada.
For example, if TransCanada was not around to advance the
state's interests in certain ways a new plan to advance the
state's interests was needed.
2:03:45 PM
Mr. Mayer turned to slide 4 titled "Admin Case: Is the
Financial Upside Truly Compelling?" The slide focused on
two key statements frequently made by the administration,
which enalytica did not dispute, but wanted to put into
context. He referred to the statements:
"The State could potentially achieve up to $400
million incremental annual cash flows, based on the
State's expected lower cost of capital."
"Under all scenarios of State credit rating downgrade
down to A-A3, the State cost of debt remains below the
TC cost of capital."
Mr. Mayer noted that enalytica agreed with the
administration that it was necessary to look at the cost of
financing in a success and failure case. In a project
failure scenario, he believed it was fairly unambiguous
that the cost of financing to the state was significantly
less without TransCanada. He remarked that in a scenario
where TransCanada financed the state's share, the interest
rate the state would pay on all costs TransCanada was
currently incurring would be 7.1 percent; it would be fixed
at 7.1 percent until FID. He stated that the expenses could
currently be met by the state from its assets and bonding
capacity; the state was currently AAA rated sovereign that
could raise debt very cheaply if desired. He did not
believe there was any question that financing the project
on its own was a cheaper option for the state.
Mr. Mayer addressed a project success case. Enalytica
agreed with the administration that it was very hard to see
a case in which the state could be better off strictly
financially through the TransCanada deal. He believed that
at best it was a wash. Enalytica also believed it was
important not to oversell the strictly financial case and
that some of the statements the administration had made
about up to $400 million in additional cash flows needed to
be contextualized. He relayed intent to come back to the
slide later in the presentation.
2:07:40 PM
Mr. Mayer moved on to slide 5 and addressed the
administration's modelling that showed the state could
receive up to $360 million in additional annual cash flows
without TransCanada. He relayed that the modelling did not
necessarily compare apples to apples; an additional $2
billion in upfront investment would be required by the
state. The basic idea underlying the model was that the
investment that was otherwise taken by TransCanada would be
financed 70 percent debt/30 percent equity by the state; 30
percent of $7 billion equaled $2 billion. He continued that
if the state assumed a 5 percent cost of debt it would
receive around $360 million in annual cash flow depending
on the assumptions. He furthered that on a net present
value basis it was worth slightly over zero to greater
amounts depending on the discount rate. He stressed that it
was important to use a commercial discount rate in weighing
the time value of money. He intended to discuss how the
lower annual cash flows shown on slide 5 had been
determined.
Representative Gara remarked that Black and Veatch had also
testified that $2 billion should be subtracted from the
amount [of additional revenue brought in without
TransCanada participation].
Mr. Mayer clarified that they were not trying to contradict
Black and Veatch. The intent was to reemphasize the point.
2:10:36 PM
Mr. Mayer scrolled to slide 6 titled "Cost of Debt: SOA
Cost of Debt Likely Higher than Today." He addressed what
it would cost the state if it were to replace TransCanada's
loan entirely with debt and what rates the state could
achieve through general obligation bonding. He relayed that
enalytica had not done any of its own analysis; they had
looked at the numbers provided by FirstSouthwest, which
were used on the chart on slide 6. He questioned what ratio
level could be reached at a particular credit rating when
considering debt service as a portion of unrestricted
general funds at any given credit rating. The idea that
underlay the chart's assumptions, was that the state could
maintain a AAA credit rating if its debt service ratio was
5 percent or lower. At a debt service limit between 5 and 8
percent the state could maintain a AA+ rating; a 10 percent
limit would mean a AA rating, and a 20 percent limit would
mean an A rating. He stated that the model was not based on
pessimistic assumptions; it was based on financial
projection of the Revenue Sources Book from the prior
spring, which assumed a return to a per barrel oil price of
$110 by 2020 and slightly increasing oil prices after that
time until 2024 where there would be a flat continuation of
revenues. The projection was for the state to be back to $4
billion annual revenues by the latter part of the current
decade and continuing indefinitely. He considered how much
the state could raise if it had one single tranche of bond
issuance. He elaborated that the state had many financing
strategies, but it would not pay for the project through a
single tranche of bond issuance. However, if it did finance
the project in that way and had to raise $15 billion, it
would mean a credit rating reduction to A, which based on
the chart would mean an interest rate of 5.34 percent.
2:14:15 PM
Mr. Mayer relayed that the interest rates shown on slide 6
also underlay the gray bars in the chart shown on the right
of slide 5. He agreed that at a AAA credit rating it was
good to see that the state had a much lower cost of debt
than with TransCanada. However, once debt was raised with
either a single issuance or general obligation bond, it was
important to realize that interest rates in a success case
with TransCanada could be 5.8 percent (based on current 30-
year Treasuries) compared to interest rates for general
obligation bonds of 5.34 to 5.5 percent. He agreed that it
was still less. He also relayed that enalytica could not
see a case in which it was worse than the TransCanada
option for the sole reason that the financing the state
received through TransCanada was effectively obtained by
providing the state's full faith in credit to the market.
He continued that if it did not raise capital at the
required rate, TransCanada would always have the ability to
leave the project anyway. He relayed that enalytica did not
see a financial scenario where the state was better off
with TransCanada; however, there were many scenarios where
the spread in the numbers was much narrower than could
appear at first sight.
Mr. Mayer returned to the question of comparing like with
like and what the additional annual revenues in the non-
TransCanada case may look like. He pointed to the chart on
the right of slide 5 and relayed that other than the $360
million all of the other numbers were derived comparing
like with like (assuming 100 percent debt). He considered
how the benefit would appear with no additional investment
of equity capital and how a number of different debt
interest rates would look. For example, at a debt interest
rate of 5.5 percent, the state would receive $130 million
in additional annual revenue [without TransCanada] rather
than $400 million. He stated that it was still a
substantial amount of money and important to consider.
Additionally, the analysis assumed that the TransCanada
financing option would include 7.1 percent interest during
construction and 6.75 percent during operation. He referred
to a bar graph on the right of slide 4 and noted that the
comparison was between 5.8 percent and 5.34 percent. He
explained that in an environment with higher Treasury
rates, the spread would remain the same but everything
would move up or down. He relayed that enalytica believed
the upper limit of the benefit would be $100 million to
$130 million if the state financed the project entirely
through general obligation bonds. He added that there were
scenarios where they could imagine the benefit would be
less. He remarked that there had not been significant
discussion over the past week that there had been an equity
option agreement as part of the deal with TransCanada.
Looking at the situation based only on financial terms, the
exposure could be reduced by taking back 40 percent to cut
the additional expensing by close to half.
2:18:48 PM
Mr. Mayer stressed that he and Mr. Tsafos did not disagree
with the numbers that had been presented by the
administration, but they believed it was important to put
them in context. Enalytica believed the financial case was
important, but that the decision was also strategic and
strategic costs and benefits needed to be weighed against
the financial case.
Mr. Tsafos discussed slide 7 titled "What's The Plan: TC
Inflection point opens up broader questions":
· How can SOA best protect its interests in AK LNG?
· No AGDC secondee in 135-strong project management
team
· Unclear decision-making / division of labor
within SOA
· AK LNG can back-fill TC exit; can AGDC step up?
· How will SOA ensure expansions / a full pipeline?
· AGDC plan to pursue expansions is unclear
· Need not just technical but chiefly commercial
expertise
· What is the optimal capitalization structure for SOA?
· Should SOA rely so heavily on debt (e.g. 100%
debt)?
· What are the merits of equity and what form might
it take?
· What is SOA's vision for AK LNG?
· What if partners withdraw (strengthens case for
TC)
· How much do withdrawal agreements raise risks for
SOA?
Mr. Tsafos noted that the decision before the legislature
was narrower than the list of questions posed on slide 7.
The list was meant as "food for thought" going forward
into the process. He noted that the project was still at
a very early stage of development. He remarked that the
more questions that could be considered up front, the
better the project outcome would be. He focused on four
areas based primarily on testimony. He remarked that
enalytica would like to confer with AGDC, but had not yet
had an opportunity to do so. He spoke to the project
staffing (the project management team had 135 staff) and
addressed how the different pieces were coming together
(i.e. the sponsors group, management committee, steering
committee, project management team) and the different
organizations in charge of different things. He asked how
to ensure that at the highest level the sponsors group
set the broad direction for the interest of the state and
that people down the chain were making decisions that
reinforced the strategic vision. He believed it was an
evolving process. He reiterated that the more everyone
could get comfortable about where the state was headed,
the better the outcome for the state would be.
Mr. Tsafos stated that one particular question was framed
by TransCanada. He referred to past discussions on SB 138
and noted that one of the big attractions of having
TransCanada at the table was the state's belief that
TransCanada would "have its back" when it came to
expansion. The state and producers were not aligned on
the question of expansions; the producers had a resource
base they would like to optimally develop and the state
wanted to open up the basin. Therefore, the state
determined that it would be helpful to have someone at
the table who understood expansions and the commercial
terms of putting a pipeline together.
Mr. Tsafos discussed that there had been a significant
number of discussions the previous year related to the
HOA and the clauses that allowed each party on its own to
trigger an expansion as long as it did not adversely
affect the other parties. Enalytica believed the former
administration saw TransCanada as helpful related to
these clauses and provisions. Relative to the future, he
questioned how the state would backfill the positions and
expertise TransCanada had provided. He qualified that
enalytica had not been "in the room" for the past 18
months and did not know to what extent it had been the
case from the beginning of 2014 to present. He understood
that it was a bit premature to talk about how to expand
the pipe that had not been built, but he asserted that
how the foundation was set up made a difference. He
stated that a pipe for one purpose would be built in one
way, whereas, a pipe for a different purpose would be
constructed in a different way. The question was how the
state would be able to do the things that TransCanada was
supposed to do. He restated that he could not say whether
TransCanada had or had not done those things.
Mr. Tsafos spoke to the future when the project would be
in operation in 2026. The idea had been that TransCanada
would be the one talking to the explorers to determine
who had gas, how much they had, how far they were from
the pipe, what it would cost to bring the gas to the
pipe, and the tariff the owners would charge. The case
was that "they'd like to have more molecules" so let them
find the explorers to determine whether it would make
sense. He stated that without TransCanada's involvement,
someone else would have to take on the role for the
state.
2:25:26 PM
Mr. Tsafos clarified that it did not mean the state
needed to hire someone immediately; however, the need to
begin thinking about the questions was an implication of
going with the decision from a governance and project
structure perspective and aligning the different parts of
the state behind the goals. He noted that it may be
necessary for the state to budget for more people in
2026.
Mr. Tsafos addressed that it was currently a good
opportunity to begin talking more about the state's
financing structure. He considered whether the state
should rely on 100 percent debt. He stated that debt and
leverage would expose the state to more volatility. For
example, if a person put zero percent down on a home,
most of their rent would go to the bank. He explained
that in no way did the question change the decision on
TransCanada, but it was part of the conversation that
enalytica believed would be helpful to have about the
optimal capitalization structure for the state. For
example, he questioned whether the state want to go heavy
on debt or think about equity options. He detailed that
if the state did want to think about equity options, it
may be hard in seven years to write a $10 billion equity
check; however, if the state knew it had to write the
check in the future, it may do things at present to
prepare.
Mr. Tsafos addressed the final points on slide 7 and
remarked that how the state made the decisions ultimately
depended on where it wanted to end up. He discussed that
it appeared that the state was heading down the path of
terminating the agreement with TransCanada, but at the
same time there was discussion about withdrawal
agreements where if one or two parties decided to
withdraw from the project, it would be nice to have
TransCanada around because it was the kind of company
that would like to invest in infrastructure. He spoke to
the importance of aligning the individual detailed
decisions with the broad strategic question. Enalytica
believed it was important for the state to have as many
conversations as possible about how to align decision
making at present in order to influence where it ended
up.
2:29:16 PM
Mr. Mayer stated that when thinking about the state's
options, he was reminded of Representative Kawasaki's
question in a previous meeting about whether the current
situation with TransCanada was a messy divorce or an
amicable dissolution. He stated that based on testimony
it was an amicable dissolution on all sides. He remarked
that "we'd like to keep it that way." He reasoned that in
current times when two people want an amicable
dissolution, by in large they were typically not forced
to stay together. He believed the current situation was
similar. He reasoned that perhaps some of the
conversation was academic. He referred to the questions
on slide 7 and relayed that enalytica wanted people to
start thinking about the degree of capability the state
required to truly defend its interests in the project
going forward.
Mr. Mayer detailed that ExxonMobil and the project
leadership had communicated that the project schedule
would not slip if TransCanada was no longer involved. He
stated that it would also be nice if the state had enough
of its own employees involved in the project that it
could independently reach the conclusion for itself. In
particular, enalytica did not have any great concern
about the project's ability to proceed in terms of
optimization and development of the existing resource
base (the state had three strong partners that could move
the project forward), but they wanted to ensure that the
state had the capability to express differences of
strategic interest. He referred to recent discussion
related to a 42-inch versus a 48-inch pipeline and the
merits of each. He stated that it played itself out on a
detailed level in every possible discussion that occurred
around the project. He addressed the minute sizing of
different components of the liquefaction trains of the
gas treatment plant and the future capacity for
debottlenecking of trains. He continued that it was not
always a foregone conclusion that the state's interest
would align perfectly with the producers' interests on
some of the questions. Therefore, it would be crucial
that the state had people at every level of the
organization deeply integrated and working on the issues
to understand the technical and commercial backgrounds
and how the state's strategic interests play out in terms
of agreements that govern expansion terms down to the
minute details of the sizing of individual components. He
urged the legislature and others involved to think about
the organization and what it looked like.
2:32:59 PM
Co-Chair Neuman commented that the information and
conversation around slide 7 had been beneficial. He
remarked that in the past Mr. Tsafos had stated that if
or when a project went to FEED that it would be a very
good sign because most projects that made it to the FEED
stage ultimately moved forward. He wondered about Mr.
Tsafos' opinion on what it meant that some of the work
plan and budget for the AKLNG project would move money
from FEED into pre-FEED. He stated that there had been an
expansion of the time and request for funds. He wondered
if the situation was typical of a project like AKLNG.
Mr. Tsafos answered that when he looked at the project
with a cost range publicly quoted of $45 billion to $65
billion, he believed where the project ended up in the
price range was the most important question that would
determine the viability of the project. He stated that if
the project was closer to $65 billion it would be tough,
but if it was closer to $45 billion something could get
done. He relayed that it would not be possible to get a
better number until the pre-feasibility study was
finished. He emphasized that it was a very serious effort
by the project sponsors. He referred to the $694 million
pre-feasibility budget and relayed that 10 years earlier
there were LNG projects that had been built for $1
billion. He believed that it spoke to how important it
was for the project sponsors (including the state) to
feel comfortable that the project could be economically
viable. In that context, he thought of the specific
question of shifting some of the FEED work to the pre-
FEED stage. He stated that the project may get to FEED,
which was a $1.5 billion to $2 billion decision. He
elaborated that one did not gamble on an amount of that
significance. He stressed that it was a very serious
decision that required being comfortable about the
technical, regulatory, and commercial aspects. He
believed it was an effort by the project to bring forward
some work streams and reduce the level of uncertainty and
risk in order to get to the end of FEED at a much better
decision point. In some ways he believed that the
shifting of costs reflected the challenges facing a
project, but it also provided comfort that when pre-FEED
was concluded it would be much clearer where the project
stood. At that point, he would take it as a very positive
step if the state and its partners elected to take the
project to its next stage; it would mean that everyone
involved had done substantial work and the willingness to
continue on to the next stage would be a significant
milestone for the project.
2:36:58 PM
Co-Chair Neuman asked if the costs included in HB 3001
were in line with similar projects. He had heard comments
that the costs were not low or high enough.
Mr. Tsafos replied that broadly speaking, the costs were
in line. He furthered that people in the oil and gas
business were paid well and if the state wanted the "A
team," it meant the state would need to pay for the
expertise. He relayed that it was not uncommon for
individuals working in the industry in cities like
Houston, Singapore, or London to hop jobs for substantial
salary increases. He elaborated that experts in the oil
and gas industry were paid serious amounts of money. He
stated that salaries in excess of $200,000 were not
uncommon. He furthered that an LNG marketing position was
a very specific type of expertise where the state would
want people to have gained expertise in serious marketing
organizations. He saw the AKLNG costs as "par for the
course." He hoped that Alaska was willing to pay to have
the best people represent its interests in the
negotiations. He stated that most sovereigns got to
negotiate with one of the partners and found it tough;
whereas, the state had to negotiate with three of them.
He relayed the negotiation would be very complex and the
state should expect to spend money to have the ability to
defend its interests upfront.
2:39:34 PM
Co-Chair Neuman discussed that Mr. Tsafos had also
mentioned the value to the state as it moved into FEED;
that generally if a project moved to FEED it would move
forward. He reasoned that it had value to the state
because it there may be entities that wanted to partner
with the state. He referenced slide 4 related to various
scenarios of state debt and credit ratings. He spoke to
the value of the high likelihood that the gasline would
move forward, which would add substantial amounts of
money back into the state's budget at a time when it was
looking to expand its revenue base. He asked if the value
had been taken into consideration in the data on slide 4.
Mr. Tsafos replied that the figures on slide 4 did not
incorporate a dilution of the state's interest. He
discussed that value was generated as a project was
developed. He explained that in a successful project, if
an entity wanted to join the project in 2017, 2018, or
2019, it would have to pay hundreds of millions or
billions of dollars depending on the share they took.
Usually when entities came in at that level of
development they were paying the expenses incurred by the
project and a discounted future cash flow of expected
project earnings. He explained that under the scenario
the state would be cashing out a little of the value. He
detailed that instead of maintaining its 25 percent
share, the state could reduce its risk slightly by
bringing in another partner and potentially make a few
billion dollars at the point it needed. He furthered that
it was not something the state would necessarily capture;
the value would be unrealized unless the state sold down.
He continued that it would enlarge the options the state
had to finance its share of the project, but it was not
something that could be captured as part of the financial
baseline. However, if in five years the state elected to
decrease its ownership from 25 to 20 percent, the value
could be determined. He elaborated that the state would
have a large cash inflow at that time and would have less
expenditure and less revenue going forward because of the
reduced ownership percentage.
Co-Chair Neuman asked if it would be advantageous to the
state in terms of the state's credit rating. Mr. Tsafos
believed Wall Street and all financial institutions would
look at the forecasted revenue and how far along the
project was, when evaluating the state's credit rating
and credit health. He expounded that if the entities
believed the project would be successful, in a good cost
environment with good revenues, they would take it into
consideration.
2:43:02 PM
Co-Chair Neuman stated that members of the legislature
had concerns about future projects in Alaska and the
state's ability to bond. Knowing that the option to
reduce the state's ownership and bring in another partner
was a value he understood. He asked if the producers had
value in partnering with the state. He remarked that the
state also happened to be the entity responsible for
permitting and regulations.
Mr. Mayer responded that there was value to everyone
involved having the state's involvement. He elaborated
that it was particularly the case when looking at the
entire history of the North Slope and Trans-Alaska
Pipeline System (TAPS) and the long history of dispute
and litigation over the asset. A big part of the reason
for the current structure was to avoid building things
according to one set of interests and instead to have
alignment between partners from the outset and to create
value for everyone involved in the same way. He believe
it was particularly important because ultimately no one
could do anything in sovereign jurisdiction without the
full support of the sovereign; in the case of the
project, the sovereign had full support and was actively
involved and generating value from the project in the
same way the companies were.
Co-Chair Neuman believed that HB 4 [legislation passed in
2013 related to the Alaska Gasline Development
Corporation and the Regulatory Commission of Alaska]
instructed state agencies (DNR and Department of
Environmental Conservation) to expedite permits received
from the project. He believed it would be a value and
probably considered on AKLNG.
Co-Chair Thompson thanked the presenters for their work
and perspective. He was excited that three of the largest
oil companies wanted make money on the project. He
reasoned that if the other companies made money it meant
the state would make money in its 25 percent ownership as
well. He believed that by FID the state would know if the
project was going to make some money. He was not
concerned about the financing because he believed it
would come along easily if the project reached that
point. His concern was the alignment with the three
producers and the state, as well as the alignment within
the state itself. For example, he was concerned about not
knowing who would take over for TransCanada. He did not
know whether it would be DNR or AGDC and which entity had
the most expertise. Additionally, there was the issue of
determining the state's decision making. He asked the
presenters how they saw the state moving forward. He
wondered if the project would be jeopardized by
indecision from the administration.
2:46:41 PM
Mr. Mayer reiterated that to truly pursue the state's
interests as best as possible would be a monumental
effort that would require an enormous amount of
capability and alignment within the state between
entities such as DOR and AGDC. He detailed that there
needed to be a very clear commercially driven strategic
picture of what the state's interests are and where they
differed from the producers and how to secure the right
high level agreements (particularly related to
expansion). He continued that there would need to be an
ability to take the high level considerations and
commercial interests and imbed them in the governance
agreements and at every level of the implementation of
the project. For example, there could be key decisions
made on sizing of different components of the
liquefaction trains or the GTP trains and there would be
a particular cost-benefit analysis if a party was trying
to monetize the existing resource base, but there may be
a different analysis if the concern was ensuring
debottlenecking expansion capability. Alignment of the
items was also important to drive down project cost and
risk; at the same time maintaining a clear commercial
strategic interest for the state. He believed parties
were justified in emphasizing the importance of the
concepts in particular the coordination across all state
entities involved in the project.
2:49:25 PM
Mr. Tsafos expounded on the conversation. He expressed
his appreciation for a slide presented by AGDC that
outlined the decision making of the project. The chart
included the project management team headed by Steve
Butt, which reported to the project steering committee,
which reported to the management committee, which
reported to the sponsors committee. Additionally, the
chart had included bullet points outlining who was
responsible for what. He believed the clarity shown in
the chart was needed in order to develop a project of the
magnitude of AKLNG. He stressed that the project was a
massive undertaking. He remarked on communication
challenges he had experienced in teams of 10 in one
location. He asked the committee to think about the
project that involved multiple cities, organizations, and
hundreds of millions of dollars. He stressed that it was
a monumental task organizationally for anyone. He stated
that the project was a work in progress, "but the closer
you can aspire to that, I think the better off you're
going to be."
Co-Chair Neuman stated that the committee had seen an
organizational chart of the State of Alaska and the
project management team. He asked if the state's
assurances that the project would stay on track and on
budget was fortified by the existence of the professional
management team that included the three major producers
making decisions on what had to be done and what got
spent.
Mr. Tsafos replied that he generally took comfort by the
number of people and the competency of the people that
the project management team consists of. For example, it
was obvious that someone like Steve Butt was coming from
very clear goals and objectives. He emphasized the large
size of the project; 800 miles of pipe and a liquefaction
facility. He stated that it would be tough for everyone
due to the difficulty of the project. He believed the
state should take comfort that the people trying to
"crack the code" were some of the best in the industry.
Additionally, he believed each of the project players
took comfort that the other players were involved because
they could feed off of each other and benefit from each
other's expertise. He believed it was a major asset for
the project. He remarked that Mr. Butt liked to say that
there was no single person with all of the required
expertise for the GTP, pipe, and LNG because a similar
project had not been done before.
2:53:04 PM
Co-Chair Thompson noted that SB 138 gave AGDC the
authority to take over the project work that TransCanada
was currently doing. He remarked that AGDC did not have
employees on the 135-person project management team. He
wondered if that showed a lack of expertise. He wondered
if AGDC would have employees with the knowledge to get
involved.
Mr. Tsafos replied that he had heard the explanation from
AGDC in front of the House Finance Committee and in the
Senate. He stated that there was no reason to doubt the
explanation that at the time of the openings AGDC had
been focused on the ASAP [Alaska Stand Alone Pipeline]
gasline and had not been able to bid for the positions.
He stated that he did not have knowledge of the resumes
from those at AGDC and could not speak to the number of
positions the agency could fill and who could fill the
positions. Enalytica had heard a number of names of
people with impressive resumes, but had no firsthand
knowledge of their expertise. He relayed that he would
take comfort if there were a few AGDC employees on the
project management team after a few months. He continued
that it was important to ensure that at the micro-project
level there were people who could keep the information
flowing at all levels to ensure the state's interest.
Mr. Mayer elaborated that the role AGDC needed to take
was greater than what it had been initially assigned; it
had a new level of challenge to rise to in order to
effectively advance the state's interests in the project.
He reasoned that if AGDC was not capable of that, there
were three very strong producers that would produce a
great project. However, the question would remain on how
effectively the state would be represented. He remarked
that a person would not expect AGDC to completely fill
the role, given that the role had not been handed to AGDC
as of yet. He was hoping to sit down with AGDC to
understand its thought processes more thoroughly. He
explained that seeing a clear assessment of AGDC's
current capabilities, the required capabilities for the
new role, and how it would acquire the capabilities,
would provide reassurance.
2:56:57 PM
Vice-Chair Saddler clarified for the benefit of the
public that the decision facing the legislature was not
to authorize construction of an LNG line, which would
occur at FID. The project was still in the process of
developing the information necessary to make a decision
to proceed to the next stage. He had told people that in
order to win the lottery it was necessary to buy a
ticket. He explained that the current project was an
expensive lottery and there was still no surety, but he
hoped the state would win. He stated that the governor
had expressed an interest to disaggregate the state's
current partnership with the producers and TransCanada
and to possibly substitute new equity partners if he did
not get the commitments to commit gas under the
withdrawal agreements he was currently negotiating. He
asked how TransCanada's involvement going forward may
continue to be valuable in a scenario in which the state
and three producers were no longer the only equity
partners or involved at all. He asked about the risks to
project success without TransCanada.
Mr. Tsafos offered that he hoped the odds were better
than the lottery. He first addressed the risks of
success. He stated that TransCanada had clearly brought a
significant number of assets, people, and expertise to
the table. He had no independent way to verify the
argument that the producers and the state could backfill
the expertise; however, he believed it was quite
possible. He believed it was possible that state could
end up with the exact same costs or perhaps TransCanada
could have made some contributions down the line that
would have led to a lower cost or a less risky project.
He stated that it was unknowable at the present time. He
remarked on the assumption that if the state had very
smart people working with it that a better outcome may
develop; however, it was not possible to know what the
state would be giving up without TransCanada's continual
engagement in the project.
Mr. Tsafos continued to address Vice-Chair Saddler's
questions. He addressed the issue of withdrawal
agreements. In the possibility that the state reached a
point of agreement with the producers that if the
producers did not want to proceed with the project, the
governor wanted the state to have two different options.
First, for the producers to sell their gas at the
wellhead to presumably the state. Second, for the
producers to toll their gas through the infrastructure
that someone else would construct. In the event that one
of the producers did not want to participate and the
state wanted to build infrastructure that the producers
tolled through, the state would probably be looking for
companies like TransCanada that liked to build
infrastructure and charge tariffs to get paid back for
the infrastructure. He continued that if the producers
were no longer interested in owning or participating in
the infrastructure, the state would be searching for
other parties to fill the role; large pipeline companies
would be one of the obvious candidates. Under the
scenario, it would make sense to either bring back
TransCanada; he thought it may be too late to keep them
in the project at present. He stated that it was a
project structure where a third-party infrastructure
owner would make sense to facilitate the project
development.
Mr. Tsafos addressed the question of buyers coming into
the project. The buyers tended to like to focus on the
upstream or the liquefaction. He communicated that he
could not speak about the market's appetite for taking a
large portion of a GTP and pipe, but it was fairly
unusual. He added that at the current stage it was
difficult to say what that would look like and what the
implications would be with or without TransCanada's
involvement. Lastly, there was a possible risk to the
state related to the agreements. He elaborated that at
the end of the day the only circumstance under which
ExxonMobil, BP, and ConocoPhillips would sell gas at the
wellhead was if they determined that participating fully
in the project was not economic. At that point, the state
would only end up with the gas if it did not have quite
as much value or it was harder to monetize. He reiterated
that there were some risks to the state depending on how
the agreements were developed and what kind of rights and
obligations the different parties had. He relayed that if
the state had a significant amount of gas and possibly a
slightly larger piece of the pie, it would likely be
looking to shed some of the risk, especially because the
only circumstance under which it may happen would be in a
higher risk project where it was slightly more difficult
for the economics to work out. He clarified that the only
time the state would be in the position was if it was a
difficult position; the producers would not sell the gas
to the state if they thought there was tons of money to
be made and would not let the state make the money
itself.
3:03:56 PM
Vice-Chair Saddler wondered if there was any indication
of whether "that might be the way this is being tracked,
is to disaggregate the current partnership agreement." He
remarked that enalytica would know the signs, whereas the
legislature would not.
Mr. Tsafos responded that it was not uncommon to try to
come up with a different structure if a project got
stuck. For example, if the state realized that one or
more of the parties was not interested in the current
structure, it would try to determine another structure
that would work for everyone. He continued that if a
partner decided that they did not want to invest $15
billion into the project, the state could wait, help them
reduce their share, or offer for them to remain in the
upstream only with the risk being taken on by the state.
He reiterated that it was not uncommon to tweak the
project structure in order for every party to have the
risk/reward relationship it desired. Specifically
regarding AKLNG, he could not say definitively whether or
not the project was moving towards a different path. He
remarked that the state had a set of interests and there
were different ways to meet those interests. He continued
that the state was currently part of the group and was
making cash calls, which did not indicate to him that the
state was not participating in the project as currently
envisioned. He reasoned that there were also occasions
where there were statements made that looked like a
slightly different project. He could not conclude that
there was a very different project structure definitively
being pursued. He believed there was just "thinking and
wavering."
3:06:42 PM
Mr. Mayer agreed with Mr. Tsafos' assessment in its
entirety. He relayed that they had worked very closely
with the administration to understand its numbers. He
particularly appreciated some of the access enalytica had
been given to the state gas team under DNR. He elaborated
that in speaking with the team, they had the impression
there were many very smart and capable people who were
making good progress down the HOA track (that framed
everything in SB 138) despite difficult negotiations on
contentious issues. He stated that every now and then
there were comments made on a higher political level that
were confusing and caused him to wonder how the
statements squared [with the current path]. He elaborated
that "we see these two things, we don't know how they
come together, we'll see how this all plays out." He
added that they had a huge amount of respect for the
technical capability and commitment of the teams working
to advance the project under the structure set out by the
legislature.
Vice-Chair Saddler commented that part of the progress of
the current hearings was to determine if there were hang-
ups in the process that militate towards changing the
structure. He had not seen evidence that TransCanada or
the producers were holding things up. He was uncertain
where the hang-ups were and why they existed.
3:08:43 PM
Representative Edgmon remarked that it seemed apparent to
him that in the process it was possible to have
organizational clarity and confusion with the leadership
hierarchy at the same time. As a policy maker, he wanted
to do everything he could to make sure that Alaska
received the best value for the long-term business
relationship required to make the project happen;
however, he worried that if the legislature and executive
branch were at odds with each other that it could have a
detrimental impact (during a period of low commodity
prices and thin margins) to a project that was just
getting off the ground. He remarked that it was a concern
that seemed to build more and more every day. He hoped
that when the special session concluded that from a
policy standpoint, the legislature would positively
influence the situation in order for Alaska to be unified
when it exercised its 25 percent voting rights in the
future. He believed it was a critical component to the
overall project going forward in lieu of all of the
economic analysis and the financial numbers the state
would be party to. He referred to Alaska Oil and Gas
Conservation Commission's (AOGCC) recent ruling about gas
offtakes and the fact that there had not been uniformity
amongst producers in terms of the 3.7 billion cubic feet
(bcf) figure that AOGCC had ultimately arrived at. He
asked the presenters to talk about the decision in
relation to a commercially viable project and a 42-inch
versus a 48-inch pipeline.
Mr. Tsafos replied with detail on enalytica's evolution
on the topic. He addressed the 42-inch versus 48-inch
pipeline. He began by discussing a graph showed by Mr.
Butt to a Joint Resources Committee hearing in Palmer
related to the production profile for Prudhoe Bay and
Point Thomson. He detailed that the graph had depicted
that there was gas in the two fields to maintain a
plateau level for about 16 to 17 years and after that
point the fields would begin to decline. He continued
that if the desire was to keep the AKLNG project going
for another 10 years (in absence of an expansion
scenario), another source of gas approximately the size
of Point Thomson would be needed. Before getting into the
details, enalytica's understanding had been that the
current design of the 42-inch pipe would have about 1 bcf
per day of additional capacity if compression was added.
He noted that 1 bcf per day was roughly the size of Point
Thomson. Enalytica had determined that at the current
design, if there were two Point Thompsons, the pipe
should be able to meet the state's needs. He elaborated
that one field would be needed for expansion and the
second would be needed to backfill the decline in
production from Prudhoe Bay and Point Thomson after year
16. He relayed that the viewpoint related to the macro-
picture.
3:14:42 PM
Mr. Tsafos explained that he and Mr. Mayer had begun to
appreciate that to have the 1 bcf per day of expansion,
it would be necessary to add a significant amount of
compression, which would be costly and use a lot of fuel;
and there would need to be very good expansion terms in
the contract. Essentially, the pipe would have a little
extra capacity. He provided a scenario were BP made a
[new field] discovery. He questioned whether under the
scenario the state could offer the 1 bcf per day on its
own to a third-party or if BP could decide they wanted to
expand because it was their discovery. He questioned what
the rights would be to use the extra 1 bcf per day
related to governance and economics (i.e. how much the
state would contribute and the economic implications of
the fuel use).
Mr. Mayer believed it was important to think about how
the costs of expansion were borne when thinking about
governance over expansion. He stated that if there was
substantial cost to the addition of substantial
compression (in terms of capital costs and operating
costs - specifically related to fuel), the governance
terms would determine if the costs were entirely borne by
an expanding party or whether others would contribute.
Some of the tradeoff would be largely determinative for
the state in terms of the risk versus reward of a 42-inch
or 48-inch pipeline.
3:16:36 PM
Mr. Tsafos believed there was a question about how much
expansion was anticipated and how easy it would be. He
relayed that the HOA had specified that any party could
basically do whatever it wanted as long as it did not
adversely impact the other parties. However, when looking
at the "nitty gritty" details, he questioned whether the
state would have exactly those rights, how the rights
would be codified and protected, and the costs. He
relayed that in that context, enalytica had no
independent view of the cost/benefit analysis of a 42-
inch versus 48-inch line. He stated that it was apparent
from the governor's AKLNG project review that some work
had happened with numbers including the payback period,
and it was not just an arbitrary reason for specifying
the administration's preference for a 48-inch line. He
believed it was very positive that the project had
decided to put on the extra cost. He remarked that the
previous administration [Parnell Administration] had also
felt strongly about the concept in terms of examining the
case for a 48-inch pipe. He opined that everyone would
have to wait to see what the commercial pros and cons
would be. He did not have an answer on that topic and
noted that the project would save $30 million in pre-FEED
costs if the answer was known at present.
Mr. Tsafos continued responding to Representative
Edgmon's questions, specifically related to the Prudhoe
Bay decision and the different parties. He addressed the
supply for the gas and relayed that one party
(ExxonMobil) had a much larger chunk of Point Thomson;
whereas ConocoPhillips had a much smaller exposure
relative to its ownership in Prudhoe Bay. He furthered
that it was a significant question related to how to
balance the items, how much flexibility the state wanted
to offer to Prudhoe Bay, and whether the state wanted the
field to have the ability to "go to 4.1 or 3.6." He
believed there was an effort to make two streams of gas
balanced over time in a way that everyone was happy with.
He viewed the topic as part of the negotiations to make
sure the project came up with a stream of gas that both
parties felt comfortable about the two fields coming
together. He continued that different parties saw the
contribution of the two fields and the flexibility that
should come from each field differently due to their
differing ownership positions in the assets. He did not
know that it presented a significant risk for the
project; it was just something that would come naturally
as part of the negotiation process. He recalled that the
AOGCC ruling determined that there would not be a huge
difference in terms of the ultimate resource recovery in
either of the two production scenarios. He did not see
the ruling as having a huge impact on the amount of gas
produced; the issue was more about the timing and the
costs.
3:20:21 PM
Representative Wilson remarked on being asked to fill a
position for $800,000 and wondered if the state should be
looking at the qualifications of everyone who would be on
the project in AGDC, DOR, DNR, and DOL. She wondered why
the focus should be only on the one position.
Mr. Tsafos answered that it made a lot of sense to look
at all of the individuals the state team was putting
forward from AGDC, the departments, and everyone involved
in the process in order to make sure the state had the
best people possible. He stated that based on salaries
made by former clients he did not think the $800,000
salary was an outrageous ceiling. He believed it was
probably a fair salary. He referenced testimony by the
DNR commissioner that the position would not receive
stock options or bonuses; it was necessary to use a
higher base salary in order to attract individuals [with
expertise] to the positions in Alaska. He did not know
whether the individual that would ultimately be hired for
the position was worth the particular amount of money,
but "to play at this level" it was the type of salary the
state may be expected to offer. He did not believe the
focus should be solely on that position. He thought it
was important to look across the board at the team and to
ensure that the state had the best people for the job. He
believed the principle provided by the project management
team that "the best people play" was a good principle for
the state as well.
Representative Wilson referred to testimony by the
presenters and wanted to ensure that the state was not
telling private industry that it should expect more
issues when they were seeking permits than if they became
partners with the state. She did not think the presenters
meant that permitting would be easier because the state
was a partner compared to a private entity wanting to go
through the process.
Mr. Mayer clarified that he and Mr. Tsafos had not made
any statements about permitting. He discussed that the
state had certain interests and there were certain things
that having a sovereign involved could make happen more
easily. One of the challenges of the project was the
importance of differentiating between the sovereign's
role as dispassionate regulator and its role as resource
owner with a commercial interest. He furthered that
things had been put into place in the organizational
structure to try to make the division clear, which was
part of the division between AGDC and DNR and even more
so with regulatory agencies like AOGCC. He detailed that
it was important in any arrangement like the one at hand
for the regulatory functions of the state to be kept
separate from the commercial interests of the state.
3:24:25 PM
Representative Wilson commented that she did not want to
send the wrong message and hoped the state's permitting
was "right on and quick" no matter who the applicant is.
She asked how advantageous it would have been for the
administration to bring the current issue before the
legislature versus back in May when "we've heard kind of
everything started going south." She remarked that the
legislature had been in special session in May and June.
She wondered about the advantages to addressing the
issues currently versus in May. She remarked that the
state was currently up against a timeline, but would not
have been in May. She asked if the presenters would have
elected to address the issue earlier if they were in the
situation.
Mr. Mayer responded that it took time to do the analysis.
He detailed that a new administration had come in at the
end of 2014 and had faced a legislative session and
working to understand the enormous complexities of the
AKLNG project. Under the scenario someone new to the
issues may come in questioning some aspects and not
others and may try to get more detail. Additionally, in
any new administration there were early struggles of
determining who was doing what, the appropriate
structure, and the interests that are represented. He
explained that it took time to figure those things out.
He continued that from an analytical and dispassionate
perspective it took time to staff up, to hire consultants
and internal resources, and to think about available
options. He stated that the current time was always the
critical point under the agreements when a decision would
be required on signing the Firm Transportation Services
Agreement (FTSA) or not; in that sense, the current
timing was logical. He stated that it would be nice if
numerous agreements could be addressed presently, but it
was completely understandable that they took time and had
intractable issues involved.
Representative Wilson believed the question should be
directed to Ms. Pitney. She stated that it was her
understanding that a decision had been made and there had
been a state of transition ever since. She opined that it
would have been nicer to address the issues before the
budget had been closed out; the money would have been
allocated at that point versus at present.
3:27:09 PM
Representative Kawasaki thanked the presenters for their
work over the past several years. He discussed that there
were many unanswered questions that had arisen over SB
138, many of which were included in the presenter's
documents. He appreciated the consistency in their
information and believed the questions should be answered
by the appropriate agencies. He believed dealing with the
"new money" would be something of an issue for the
committees to discuss. He addressed changes in the
[project] work plan that cost more money so that some of
FEED would go into pre-FEED. He remarked on the
presenters' earlier testimony that generally the concept
was looked favorably on as a risk reducer.
Mr. Tsafos responded that his interpretation was that the
state saw risks and wanted to bring the work forward to
make sure it grappled with the risks. He did not see it
as favorable that the state needed to do more work
because it meant there were more issues to deal with;
however, it would give comfort that if the project moved
to the FEED stage it would be easier to make a better
decision because the issues had been brought forward and
the state would be more comfortable with its ability to
manage the risks it had foreseen.
Representative Kawasaki referred to the question related
to expansions on slide 7. The committee had discussed a
lot about expansions and having a third-party pipeline
company versus a producer-owned pipeline company and the
fact that if a third party wanted to expand it would be a
great benefit for the state, which he agreed with. He
wondered under what conditions the state/AGDC did not
want to pursue expansions. He could not think of a time
where that would be the case.
Mr. Mayer responded that there was not a specific
scenario he and Mr. Tsafos had in mind. The bullet point
had been included in response to questions from both
legislative finance committees about what future
expansions would look like, how they would be managed,
and if AGDC would have the capacity. He relayed that they
had not had an opportunity to discuss the issue with
AGDC, but would like to do so. At the time, they had been
concerned to hear a response that the project would look
a lot like TAPS (i.e. there would be a project company
and all of "that" would be the function and
responsibility of the project company). He relayed that
enalytica had been very clear in the discussion the
previous year that the intention around negotiating the
HOA was the idea of a project within a project and pipe
within a pipe and that any party could do things in its
interests independent of the others. He continued that
the issue had been particularly clear in the expansion
principles under the HOA, which stated that any party
wanting to expand could do so provided that it did not
negatively impact the other parties. However, taking the
approach meant that an entity could not rely on everyone
agreeing on the concept together or guarantee unanimity
at the voting committee. He discussed a scenario where
there was an entity that wanted to pursue expansion
aggressively and had all of the technical and commercial
capability required to make the case to determine the new
resource base, tariff, and the level of resources
required to make expansion economic. He continued that
the entity would be responsible for determining how to
build the commercial case bearing in mind that the other
partners would not necessarily want to do the expansion.
He wanted to ensure that the tension was clear and that
moving forward everyone involved on the state's level was
thinking in those terms.
3:31:50 PM
Representative Kawasaki asked if it would be more
effective for the state to pursue expansion without
TransCanada. He surmised that with a third-party in that
particular case, there may be disagreements between
TransCanada and the state. He believed the HOA spelled
out the ways in which an expansion would happen if the
state wanted it but TransCanada did not.
Mr. Mayer stated that in many ways he agreed with
Representative Kawasaki. He elaborated that they looked
over the past two years and saw them as a chance to test
some of the assumptions: whether the state had a partner
that it was perfectly aligned with on all of the issues
by bringing in an independent company or if the entities
would sometimes disagree and have to negotiate against
each other and whether it was positive or not. He stated
that many of the details surrounding the issue were
confidential and would never be known. However, looking
forward it was obvious the state did need to have the
capability. He remarked that they would never know
whether the capability existed under the previous
arrangement, but it took a lot to have the capability. He
stated that it was important to think about the
capability currently. He reasoned that the fact that
everyone could agree the state wanted the capability did
not make it so; it was necessary to plan at present in
order to ensure that it was secured.
Representative Gara believed that in the past one of the
problems with TransCanada owning 25 percent of things the
state did not own (i.e. the pipeline or GTP), there would
be areas where the state had no access to information,
which presented some problem. He requested an example of
an area where it would be a problem for the state.
Mr. Tsafos responded that he and Mr. Mayer could not
speak on specifics because they were not on the project
team. He could see that with layers of confidentiality
that as the project sponsor it the state would like to
know that "nitty gritty" decisions were being made with
expansion in mind and to gain access to some of the
technical information. He could see how that flow back to
AGDC or the departments may not be seamless. He relayed
that he had worked in enough organizations where non-
confidential information was hard to come by; it was not
hard for him to imagine that once three or four layers of
confidentiality were added it would get harder and harder
to access the information and in a timely way prior to
decision points or votes.
Mr. Mayer added that Marty Rutherford (deputy
commissioner, Department of Natural Resources) and Deepa
Poduval (principal consultant, Black and Veatch) had
provided an example when they had presented to the
committee recently. The example had been related to
existing arrangements with TransCanada related to
byproduct disposal. He continued that a significant
portion of the function of the GTP was the removal of
carbon dioxide and its eventual disposal. How the
economics of the removal and disposal worked was a
complex issue that allowed all sorts of costs to be
allocated in all sorts of places. He stated that it was
easy to see from the state's perspective that there were
particular interests in seeing the issue handled in
particular ways and that if there was not visibility into
how the issue was being handled it has neither
transparency and visibility nor direct control over
voting, which would create some issues.
3:35:57 PM
Representative Gara believed everyone agreed that it
would cost the state more if TransCanada remained in the
project (as opposed to the state buying TransCanada's
portion) and the project eventually did not move forward.
He asked for verification that the lower the state's
financing costs compared to TransCanada, the greater the
state's revenue would be over the long-term if
TransCanada's portion was bought out.
Mr. Mayer concurred.
Representative Gara referred to financial consultant
FirstSouthwest's statement on page 36 of the Black and
Veatch report that state financing would result in a
materially lower interest cost to the state than under
the TransCanada agreement. He asked if the presenters
disagreed with the statement.
Mr. Mayer responded that they did not disagree with the
statement "as it stands," but they wanted to put some of
the numbers in context. They believed that from a
precautionary perspective it was important to think about
that the numbers on the higher end of the spectrum were
some of the things that were presented rather than the
lower.
Mr. Tsafos added that it depended on what was meant by
the word "material." He elaborated that if "materially"
was interpreted as 2 or 3 percentage point delta he
thought that was hard to see. He believed the spread he
and Mr. Mayer had talked about was much more reasonable
at the higher end or lower end of the credit rating.
3:37:38 PM
Representative Gara referred to slide 5. He stated that
Ms. Poduval had testified that the 5.5 percent financing
rate could increase the state's revenue by an additional
$130 million per year. He stated that 5.5 percent was
about where the state would be if it was at the state's
historically worst credit rating. He asked if the
presenters recalled the testimony.
Mr. Tsafos answered in the affirmative.
Representative Gara reasoned that no one knew which of
the bars on slide 5 represented the right number. He
continued that with current market conditions and the
worst financing level the state had ever been, Ms.
Poduval had testified that the state would bring in $130
million extra per year. He asked for verification that
the annual additional revenue could be higher or lower if
the state got its fiscal house in order hopefully before
2017, that any of the scenarios [on slide 5] were
reasonable assumptions, and more would be known as time
passed.
Mr. Tsafos commented that he realized the irony of having
a Greek tell the committee about state finances. He
remarked that Greece's credit rating had never been as
bad until it was. He stated that "these are unknown
things." He referenced the 5.5 percent figure and pointed
to a chart from FirstSouthwest on slide 6. He detailed
that if the state were to issue everything overnight
(which it would not) and if it had "this kind of
downgrade" the interest rate would be close to 5.5
percent. He referred back to slide 5 and stated that the
$130 million in additional revenue brought in with an
interest rate of 5.5 percent was compared to the baseline
tariff from TransCanada and was not adjusted for the
equity tracker. He explained that it compared 5.5
percent, which represented current conditions, against
6.8 percent, which were the conditions of December 2013.
He furthered that under current conditions the tariff
from TransCanada was more like 5.8 percent in the
operational phase. The comparison was really between 5.5
percent and 5.8 or 6 percent; therefore, the delta was
much smaller. He explained that it was a little messy
because of the need to compare time and interest rates.
He furthered that the delta was really between 5.3 and
5.8 (a 50 basis point delta) and detailed that at a 50
basis point delta the revenue was closer to $60 million
[slide 5]. He was not trying to characterize the issue as
good or bad, but to contextualize it.
Mr. Mayer clarified that over the past several days there
had been a presentation by the state finance team
(Lazard, FirstSouthwest, and Greengate) related to
historical credit ratings with A- as the worst the state
had experienced. Additionally, there had been a
presentation by Black and Veatch, which had presented the
analysis on slide 5. He believed Black and Veatch had
been clear to defer any questions the committee had about
specific interest rates to the state finance team. He
noted that Black and Veatch was solely presenting the
numbers as a range of outcomes.
3:41:55 PM
Representative Gara asked if it was fair to say that the
chart on slide 5 represented a range of reasonable
potential outcomes and what would actually occur was not
yet known. Mr. Mayer believed it was a reasonable
statement. Particularly given that the beginning premise
was that there was no circumstance under which the state
is worse off without TransCanada from a financial
perspective; the additional revenue was a random variable
that would go from zero to some positive number.
Representative Gara commented that there had been some
focus on the $130 million range [slide 5], which was the
reason he wanted to make enalytica's view on the issue
clear.
Representative Gattis returned to the well-paid $840,000
per year position. She asked if there was a need to hire
the (gas marketer) position currently. Alternatively, she
wondered if the state could hire the position at the
start of session [January 2016] or after December 4
[2015] when the state would know whether it had gas to
market.
Mr. Tsafos answered that he struggled with the question
because he did not know the material difference between
approving the funds for the position at present or in a
few months. He relayed that the state did need a gas
marketer at present in the sense that the decision to
take royalty in kind (RIK) was premised on the state
being comfortable that it would know what to do with the
gas once the state had it. He believed that to gain that
comfort, the state would need people who had expertise to
assess the risks to the state of taking possession of the
gas. The preceding year there had been a big emphasis on
the state possibly negotiating joint venture agreements
with individual partners in the project to market the gas
jointly and having the partners make offers to the state
to market their gas. All of the things were eventualities
that are factoring in the decision to take the gas in
kind; therefore, he did believe it was important to have
a gas marketer at present. He reiterated he did not know
exactly where the negotiations were and therefore could
not speak to the difference of appropriating the money at
present versus in a few months. However, based on
experience, it took time between the appropriation of the
money and when the person started working. For example,
if the money was appropriated under the normal
legislative budget in April [2016], the search to fill
the position would begin in May, and then it would be
summer when perhaps no one would want to come for
interviews. The items were the types of things he
recommended thinking about (i.e. would the state
inadvertently delay the date the person would actually
join the gas team and help with negotiations).
3:45:36 PM
Vice-Chair Saddler referenced the financials on slide 5
and clarified that it was not accurate to say that there
was up to $360 million in additional revenue for the
state without TransCanada's involvement. He noted that
the top of the slide indicated that it was a wash. He
continued that given the consideration of the net present
value (NPV), the state would buy the $360 million in
additional cash flow later by the upfront investment of
$2 billion.
Mr. Mayer responded that in NPV terms, the number was not
large. At a 10 percent discount rate Black and Veatch
showed the NPV at zero, but in its report he believed the
figure was about $30 million (the difference was due to
rounding). He reasoned that it was possible to have many
arguments related to the appropriate discount rate to
use. He believed the it was useful in showing that there
was not some overwhelming piece of value the state would
miss out on if it continued in partnership with
TransCanada. He opined that it was useful to compare
apples to apples and he appreciated that Black and Veatch
hand included the chart to enable the comparison. For
example, if the state fully funded the replacement of
TransCanada through debt, the state would not receive the
$360 million, but was somewhere on the continuum [slide
5]. At 5.5 percent financing the state would receive $130
million [per year], bearing in mind that it reflected a
larger spread than the current reality. He continued that
where the state would fall on the spectrum [of additional
revenue] was not known. There was some value between zero
and a positive amount in the $100 million range. He
relayed that he and Mr. Tsafos were happiest with the
right side of the chart [lower additional revenue to the
state] in terms of what the benefit may be, bearing in
mind that there could be other financing strategies the
state was considering that would move the additional
revenues further to the left [on the chart]. There was
likely some positive benefit in annual cash flows that
would come from the state financing its portion of the
project on its own. He relayed that in enalytica's
viewpoint the benefit by itself (absent strategic
considerations) was not dispositive.
3:48:31 PM
Vice-Chair Saddler appreciated the clarification. He
turned to slide 3 that included a reference to the non-
visibility of information. Additionally, slide 7 referred
to unclear decision making and division of labor in the
state. He wondered if it was usual or unusual to have
unclear decision making and a lack of visibility. He
wondered if the confusion had any consequences to the
likelihood of success for the project.
Mr. Tsafos responded that in general, confusion did not
help the advancement of a project. For example, how
people interacted when it was unclear who was in charge.
He could not speak to the extent of that in the current
project because they were not in the organization. He
addressed whether it was typical for this kind of
megaproject and reasoned that it was unlikely to be
typical of successful megaprojects. He explained that it
was hard "to stumble your way into a $55 billion
project"; an entity needed to have its act together to
"play at this level." He clarified that he was not
speaking about the specific circumstances of the state.
In general, when an organization had decision making and
informational barriers it always got in the way of
getting things done; it was true for any endeavor and was
particularly true when trying to do one of the hardest
and most complicated infrastructure projects in the
history of the world.
Vice-Chair Saddler wanted to better understand the
"intangibles" of the project. He asked if it was possible
to quantify TransCanada's benefit to the project absent
the financials. He believed enalytica had referred to the
concept as continuity in its original slides. Mr. Tsafos
answered that it was possible, but he cautioned against
attaching a great deal of certainty to the numbers. He
believed there were ways to weigh the benefits; for
example, it was possible to attach probabilities of a
more expensive project or slower development. There was
math that could be done, but he believed it would be
purely conjecture.
3:52:03 PM
Mr. Mayer referred to the list on slide 3 and relayed
that there were some key items the state had successfully
received the benefit from in terms of continuity,
momentum, AGIA dissolution, and having TransCanada at the
table during long-term negotiations. He continued that it
was possible to look back at the past 1.5 years and see
it as a very good decision at the time and that a
different point in the relationship had been reached at
present.
Vice-Chair Saddler remarked that there was a subjective
component to the information and it was nice to know if
some precision could be brought to the metrics of the
decision.
Co-Chair Thompson remarked that if the state did not
terminate the agreement with TransCanada that the company
intended to vote "no" on December 4, which would end the
project completely. He believed it could be quantified
that the outcome would not be to the best advantage of
the state, especially with a project that may end up
being successful.
Mr. Tsafos suggested thinking about what the state was
receiving from the partnership with TransCanada (i.e.
AGIA, continuity, and other) compared to what it paid. He
noted that the state had paid about $3 million in
interest to TransCanada. He relayed that the state had
received some expertise out of the partnership. He did
not know what the numbers would have looked like absent
TransCanada.
Representative Guttenberg remarked on Co-Chair Thompson's
statement that if TransCanada was still involved, the
company would vote "no" during the meeting on December 4.
He did not believe he would ask any additional questions
beyond that statement.
3:54:32 PM
Representative Munoz asked about forcing gas to the
project, whether or not the partner was involved in the
ownership of the project and setting a December deadline
for the commitments. She wondered if it was a feasible
expectation on the part of the state and if it was in the
state's best interest to demand those kind of agreements
at the current stage.
Mr. Tsafos addressed Representative Munoz's question
related to feasibility. He explained that he had no idea
because he did not know how far the two sides were in
terms of what the state was requesting and what the
producers were willing to offer. He detailed that all he
had was the three letters from the producers, which the
legislators also had, stating that subject to certain
items they were willing to talk to the state and sign an
agreement. He did not know how close the two sides were
or what the terms were. He addressed Representative
Munoz's question related to desirability. He could see a
circumstance where if one or more of the parties decided
to exit the project, one of the solutions the state could
explore was to buy their gas at the wellhead. He relayed
that in other LNG projects it was fairly common for
companies to adjust their exposure to the project as they
learn more about the project and as they did a thorough
assessment to determine the portion of the project they
wanted. He believed it made it made sense to explore a
different structure to solve the non-commitment of a
party; the process had occurred in many projects. He and
Mr. Mayer were concerned about the state making too much
of a commitment up front because it did not have a lot of
the information. Their overall approach had been that if
ExxonMobil [or another producer] was willing to sell the
state gas at the wellhead, it was probably at a price the
state should not pay. He continued that if a producer was
willing to sell the state gas at Henry Hub pricing, it
meant that the producer did not think it could make more
by participating in the project; therefore, it meant that
the state would probably not make more than that by doing
the project.
Mr. Tsafos continued to address Representative Munoz's
questions. He relayed that he would like to understand
how specific the discussions were and how exactly the
terms were playing out. He reasoned that if the state
locked itself in a deal, it could end up with
liabilities, which could be a problem. He relayed that it
was slightly worrisome to give the companies a way out.
He elaborated that the project was very complicated and
he would not want half of those involved thinking that
they would just exit the project. He explained that in
that sense the state would not be spending time solving
anything and would be designing its exit strategy. He
referred to testimony from Vincent Lee with TransCanada
that once people thought TransCanada was out of the
project it was harder to get people to spend time on
TransCanada's issues. He explained that once people
started thinking they may have a way out, a muddling of
the negotiations and the progress would begin. He was not
sold on the necessity of entering the agreements at
present versus over time. He added that it was his gut
feeling, without having significant visibility into the
specifics.
3:59:36 PM
Representative Munoz asked if the requirement or demand
could jeopardize the project and its momentum.
Mr. Mayer strongly agreed with Mr. Tsafos' answer. He
addressed discussions related to the idea of a successful
project scenario versus a failed project scenario and
what the costs looked like in both cases. He relayed that
when they spoke about withdrawal agreements they were
referring to some iteration of the failure scenario. Not
necessarily the failure case of any project, but the
failure of the project as it was currently designed. He
furthered that there were aspects of the failure scenario
the state needed to think about and plan for. However,
everyone involved in the project had limited time and
resources. He remarked that due to the size of the
companies it was easy to think that they had unlimited
staff to put on the project and that they could respond
to anything the state asked from them. The reality was
that everyone involved in the process had limited time
and resources. He continued that whenever one set of
problems were focused on, there were another set of
problems that did not receive focus. To the extent that
the goal was to advance further towards project success
as envisioned under the HOA, work that went into
withdrawal agreements was work that took away from that
goal.
4:02:05 PM
Representative Munoz asked the presenters to provide
their comments on the SB 138 template and how it worked
as a positive model for the State of Alaska.
Mr. Tsafos suspected she was asking about the merits for
the state of becoming a 25 percent equity partner and
taking ownership of the gas. He did not want to "get into
the weeds of SB 138" because he did not recall all of the
specifics. Broadly speaking, there was one major
challenge in developing the gas in a different way. He
elaborated that if the state taxed the gas at the
wellhead and generated its revenue as a state (the same
as oil) it would face two fundamental challenges. First,
the state made its money completely differently than the
producers. Second, there was not a significant amount of
value at the wellhead to tax. For example, at current
prices or under a scenario where prices were $10 to $11
in Japan, if it cost the state $9 or $10 to transport the
gas to Japan, the state could tax that remaining $1 as
much as it liked, but the earnings would not be
significant. The additional challenge in the pre-SB 138
structure was that not only was there very little value
to tax, but there was no way to decide if the number to
subtract from the $11 price in Japan should be anywhere
from $5 to $11 because TAPS (over which the state had
experienced significant conflict with producers) was a
federally regulated pipeline. He detailed that TAPS had
very clear jurisdiction and tariff setting, but there had
been significant challenges. He asked members to think
about a gas pipeline where the tariff was $60 per barrel
instead of $4 or $5 and where there was no regulatory
structure because Federal Energy Regulatory Commission
(FERC) generally did not regulate the tariff of export
projects. He continued that there were substantial
challenges to overcome to be able to make any money. One
of the reasons he and Mr. Mayer liked SB 138 in what it
tried to accomplish was to say "that's too much...let's
not go down this path." He stated that it was like
reentering a lengthy marriage and thinking about how much
arguing there had been along the way. He stressed that
the state and producers did not want to do that.
Mr. Tsafos explained that the merit of the state taking
equity was that there would be no valuation questions and
the state would take 25 percent of the gas, its royalty,
and would turn its tax into gas. Therefore, the state and
producers would each have their ownership of the gas,
pipe, and LNG. He and Mr. Mayer had been surprised the
most to learn that because of the way the valuation
process worked, the state was actually better protected
on the downside by taking ownership in the project. For
example, with a price in Japan of $11 and a cost to the
state of $10, if the state taxed the amount it would only
receive the tax times $1. However, if the price in Japan
dropped to $10, the state's earnings would be zero. Under
the scenario, the state was subjected to a much bigger
swing. He noted that there were many additional issues
that could be discussed on the topic.
Mr. Mayer turned to slide 7. He addressed Mr. Tsafos'
point related to revenue volatility, price, and commodity
risk. He relayed that Mr. Tsafos' statements were
particularly true in a scenario where the state was able
to fully fund its capital commitment with equity. He
detailed that the state could say that it built and paid
for the infrastructure up front and going forward it
would simply receive revenue for its LNG. Additionally,
there would be no impact of leverage; there would be no
fixed cost the state would need to meet for every mmbtu
of LNG that it sold to Japan. Whether the price was $18
or $6, the state would receive that amount. The
fundamental question under the scenario was whether the
state achieved the desired rate of return over the 20-
year project time horizon. He referred to significant
discussion about financing the project through high
levels of debt, which was concerning to them. He
explained that it was like purchasing a house with a down
payment of less than 5 percent; it massively increased
the purchaser's exposure to volatility when prices
increased or decreased. He relayed that the same was true
for the value at the wellhead model; if the state paid
for its portion with significant leverage, it would be
exposed to high commodity risks. The question had been
included on slide 7 to stress the point about beginning
to think more broadly about the capitalization structure
for the project and all of the things the state could do
to minimize its exposure to price volatility. For
example, through capital structure, LNG contracts, and
considering a different risk tolerance than the
producers. He stressed that the thinking about the items
would become very critical moving forward.
4:10:43 PM
Co-Chair Thompson thanked the presenters. He reviewed the
agenda for the following day.
HB 3001 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
4:11:27 PM
The meeting was adjourned at 4:11 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 3001 enalytica, TC in AK LNG, October 2015.pdf |
HFIN 10/29/2015 1:30:00 PM |
HB3001 |